UK productivity gap half-explained?

According to Philip Aldrick, Economics Editor of The Times, Britain’s dismal productivity gap with much of the developed world is due not only to lack of investment, bad management and low interest rates as previously thought

Another significant causal factor has been found

The UK’s ONS – Office for National Statistics – asked the Paris-based OECD – Organisation for Economic Cooperation and Development – to look into the consistency of national data produced by 40 different countries and they found ‘the maths used leads to misleading results’

It turns out there are differences in the adjustment of official figures used to calculate hours worked and employment levels – different countries make different adjustments for their self-employed, overseas workers, prison workers and even drug traffickers and sex workers – and for workers’ tendency to underestimate holiday time taken

Hence, comparisons of national labour productivity levels – national output (GDP) divided by national hours worked – end up being ‘apples with pears’ comparisons

If the UK made the same sorts of adjustments, it is estimated their labour productivity would increase by 10%

And actual labour productivity gaps between the UK and France, Germany and the USA would be much smaller than officially thought viz:

. 16%, not 24%, less than USA

. 14%, not 22%, less than Germany

. 11%, not 19%, less than France

So, whilst the finding of these errors does not explain away the apparent productivity gaps between the UK and other developed nations, nor cover the errors that abound when assembling all national productivity data, it does suggest things may not be quite as bad as once thought, at least in the UK

So let’s leave the last words to Richard Heys, deputy chief economist at the ONS: “This research reveals some striking differences in the way different countries estimate the amount of work taking place – however, they don’t explain why productivity growth has been so stubbornly low for so long”